SEOUL - SOUTH Korea's won approached a 10-year low against the dollar on Wednesday on increased fears that the global credit crunch is deepening amid slumping stock markets.

The currency was trading at 1,382.00 against the US unit as of 11.00am (0200 GMT, 9am Singapore time), down 53.9 won from the previous session's close.

It was the weakest level since October 1998, when the nation was grappling with the East Asian financial crisis.

'Dollar demand is still strong and the currency movement is volatile', Mr Kwon Woo Hyun, a currency dealer at Woori Bank, told Yonhap news agency.

The global credit crunch is forcing local banks and companies to meet their dollar needs by themselves, dealers said.

The sharp fall in global stock markets was also fuelling strong demand for the greenback.

South Korea's KOSPI stock index was down 2.74 per cent to 1,325.07 as of 11.00am after the Dow sank 5.1 per cent on Tuesday.

The local forex market has been suffering from a dollar shortage as banks and companies rush to what is seen as a safe haven currency on concerns of a global financial crisis.

The finance ministry has announced that it will inject a total of US$10 billion (S$14.6 billion) into the won dollar swap market to provide liquidity.

The won has slumped around 30 per cent against the dollar so far this year despite the authorities' use of foreign exchange reserves to try to stem falls.

Authorities have spent almost US$25 billion since March trying to support the won, Yonhap said. -- AFP